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Johnson & Johnson JNJ

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Health and Human Services and Congressional Plans to Cut Drug Prices Look Manageable by the Industry

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

Upcoming congressional proposals on lowering drug pricing as well as a recent plan from the Department of Health and Human Services have put U.S. drug pricing policy back in the spotlight. We continue to see Medicare Part D redesign capping out of pocket costs of seniors and Medicare inflation caps as the most likely reforms to pass Congress. We forecast a 50% probability of Part D redesign (potential 1% hit to U.S. drug sales) in our base-case scenario and an overall 4% hit from inflation caps in our bear-case scenario. While price negotiation can take many forms, we haven't seen a proposal that we believe is moderate enough to pass the razor-thin Democrat majority in the Senate and also be ambitious enough to gain the support of more progressive Democrats in the House.

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Company Profile

Business Description

Johnson & Johnson is the world's largest and most diverse healthcare firm. Three divisions make up the firm: pharmaceutical, medical devices and diagnostics, and consumer. The drug and device groups represent close to 80% of sales and drive the majority of cash flows for the firm. The drug division focuses on the following therapeutic areas: immunology, oncology, neurology, pulmonary, cardiology, and metabolic diseases. The device segment focuses on orthopedics, surgery tools, vision care, and a few smaller areas. The last segment of consumer focuses on baby care, beauty, oral care, over-the-counter drugs, and women’s health. Geographically, just over half of total sales are generated in the United States.

Contact
One Johnson and Johnson Plaza
New Brunswick, NJ, 08933
T +1 732 524-0400
Sector Healthcare
Industry Drug Manufacturers - General
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jan 3, 2022
Stock Type Slow Growth
Employees 136,400

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